Benefits of Having a Mortgage

Buying a home is a huge advantage for anyone! You can build equity, have the possibility of property appreciation, and benefit from the stability that comes from homeownership. However, the mortgage application process can feel daunting or overwhelming, interest rates remain high, and you'll then have all the responsibility that comes with homeownership. 

While getting a mortgage and buying a home isn't for everyone, the benefits of a mortgage can outweigh the negatives, even with high interest rates. Read on for the main benefits of getting a mortgage. 

8 Benefits of Having a Mortgage

Here is a summary of the benefits of having a mortgage. You can add these to the “pros” column of your personal mortgage consideration. 

1. Own a Home Without Paying the Full Purchase Price Upfront

According to the Federal Reserve Bank of St. Louis, the average home price was $420,800 for Q4 of 2023. Very few Americans have $400,000 in savings to buy a house in their 20s, 30s, or even 40s. According to Edward Jones, Americans between the ages of 55 to 64 have an average of $408,420.

Therefore, the biggest advantage of a mortgage is that you could buy a home decades before you could save to buy it in cash, also getting ahead of inflation and increasing property prices. In addition to a mortgage, many states have first-time homebuyer programs to help you with closing costs and down payment, helping you save more. 

2. Boost Your Credit Score

Your credit score includes the credit mix, which looks at how responsibly you manage different types of loans or credit products. If you add a mortgage to your credit mix and pay it on time each month, over time, you could boost your credit score. 

However, getting a mortgage isn't the best way to boost your credit score, and your credit score isn't a reason (on its own) to get a mortgage. 

3. You May Get Tax Benefits 

Having a mortgage gives you some tax benefits. Even at high interest rates, you can deduct mortgage interest payments from taxable income. The amount you pay in interest will vary over the mortgage amortization, but this benefit is not insubstantial. 

For example, on a $300,000, 30-year mortgage with a 7% interest rate, you'll pay over $21,000 in interest in the first year. You can find more on the home mortgage interest deduction from the IRS.

4. Build Equity in Property Over Time

Another significant advantage of getting a mortgage to buy a home is the ability to build equity over time. Each monthly payment contributes to the principal, so you're essentially buying greater asset value for yourself with each monthly payment. This contrasts renting, where you don't recoup the costs or build equity. If you already own a home, you can calculate your home equity here. 

5. Stable Housing Costs Compared to Renting 

Having a mortgage gives you stable housing costs compared to renting. Because of inflation over time, rental prices will keep increasing over decades. When you get a mortgage, you either have a fixed payment with a fixed interest rate or a relatively stable rate with an adjustable-rate mortgage, usually with a maximum cap. 

6. Potential for Property Value Appreciation Over Time

In addition to your monthly mortgage payments building equity, real estate appreciates over time. That means if you use a mortgage to buy a home, you could build greater equity than what you use to repay the mortgage. 

Homes in the U.S. generally appreciate by an average of 2% to 3% per year. While that might not seem like much, over decades of homeownership, this can allow you to keep pace with inflation and build greater asset value. 

7. Keep a Stash of Cash for Emergencies 

A mortgage helps you build up a valuable asset. In case of emergencies, major home repairs, or other issues, you can access that equity through a home-equity loan or home equity line of credit (HELOC) to get cash when needed. 

8. Impact on Your Family's Health and Well-Being

Arguably the greatest benefit of homeownership is the stability it gives to families. You're able to put down roots without the worry of needing to move or being priced out by increasing rent. This can impact your family's well-being and stability, in addition to the financial benefits.

Financially, a mortgage can help your family build long-term wealth, equity, and asset value to keep pace with inflation. In addition, homes are an excellent vehicle to pass on generational wealth. 

Possible Disadvantages That Need To Be Taken Into Account

While a mortgage can help you buy a home, it comes with possible risks and downsides. Here are what you'll want to consider. 

1. Monthly Payments Can be a Financial Burden

The monthly payments can be a financial burden if you buy a more expensive house than you can afford or have an unstable income. Likewise, if you get an ARM and interest increases substantially, it could create financial strain. 

2. Accrual of Interest Can Increase Total Cost of Loan

With high interest rates, you could pay substantially more for the home than you pay in mortgage principal. If you are unable to make the full interest payment, accrued interest accumulates on top of the principal and adds to total costs over time. 

3. Risk of Foreclosure if Payments Are Missed

If you miss mortgage payments, you risk property foreclosure. This, of course, negates all the benefits of getting a mortgage. To avoid this issue, be sure to have extra emergency savings to cover at least six months of expenses. You can try to take a smaller mortgage that is 33% of your monthly income or less. 

Compare the Best Mortgage Companies From Benzinga’s Top Providers

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Should You Get A Mortgage?

Unless you have substantial savings, a mortgage is the most reliable vehicle for homeownership. Even with high interest rates, it offers a path to homeownership that benefits your financial health and your family's well-being. While some high-cost markets can make getting a mortgage prohibitively expensive, you can consider suburbs or other lower-cost areas with other families or amenities important to your needs. 

Frequently Asked Questions